Indian hot rolled coil (HRC) prices have received unexpected support helping them to remain at INR 36,250/mt ($650/mt), amid reports of production cutbacks by Chinese mills and possible Indian government restrictions on imports, traders said on Friday, August 17.
Discount offers have been pulled back from 3-4 percent prevailing in the previous weeks with the market expecting higher domestic prices to continue, at least until the end of this month when import prices and quantity trends find direction, the traders said.
"Domestic prices are marginally buoyed by reports that Chinese mills are cutting back production taking maintenance breaks," a Mumbai-based trader said.
Some ex-China HRC shipments at $560-565/mt CFR Mumbai have been concluded, but import enquiries at levels of $550/mt have not resulted in any offers this week, the trader said.
Indian HRC producers are banking that, even though Chinese mills have lowered prices, a pick-up in their domestic demand in September-October and production cutbacks would limit the downward movement of ex-China export prices, he added.
The Indian steel ministry is also considering the option of putting HRC on the restricted list, which would mean only end-users would be allowed to import, a Kolkata-based trader said.
However, any government intervention would be counter-productive since, by artificially sustaining high domestic prices, it would force user industries to pass through the cost in their final pricing, stoking inflationary pressures, he added.
"The domestic HRC market is victim of the Indian steel market moving divergent to international trends and hence moving sideways," a marketing official at a private steel mill said.
"A downward correction of $15-17/mt is inevitable. The question is when? Integrated mills will have to take a call soon and, if current import price trends hold, it may happen ahead of the festive season in October," he added.